BAF 1101FINANCIAL ACCOUNTING 1

CAT 1 & 2
QUESTION ONE
A three column cashbook is to be written up form the following details, balanced off and the
relevant discount account in the general ledger shown.
2017 March;
March 1 Balance forwarded cash 2300 bank 470
2 The following paid their accounts by cheque after deducting 5% discount
Betty Sh.1400, Taylor Sh.2200 and Harris 8000
4 Paid, rent by cheque Sh.1200
6 Received commission by cash Sh.6000
8 Paid the following accounts by cheque in each cash deducting a 2.5% cash
discount; Black 3600, Tower 4800, Rowse 3000
10 Paid motor expenses Sh.4400 cash
12 The following accounts were paid by cheque after deducting 10% discount.
Wilson 2600, Wilson and Son 3400, winter 4600
15 Paid wages in cash
24 Cash drawings 1200
29 Bought fixtures by cheque 6500
30 Hanken pays his account of Sh770 by cheque Sh.740 deducting Sh.30 less
discount.
[15 marks]
QUESTION TWO
In the process of preparing final accounts, for your company, you are faced with a
number of problems as summarized below: (10 Marks)

(i) The Managing Director wishes the company’s good industrial relations to be reflected in
the books of accounts.

(ii) The long term future success of the company is uncertain.

(iii) Although the sales have not yet taken place, some liable customers of the company have
placed several large orders that are likely to be extremely profitable.

(iv) One of the owners of the company has invested his drawings in some stocks and shares.

(v) At the end of the year, an amount of outstanding electricity that has been outstanding and
consumed during the year has not yet been paid for.

Required:

(I) State which rule the accountant would normally follow in dealing with each of the above
problems.

(II) Explain briefly what each rule means and how each should be applied.
QUESTION THREE

XYZ Ltd bank statement dated 31 st December 2015 shows a balance of Kshs. 24,594.72.
The company’s cashbook on the same date show a balance of Kshs. 23,196.79 on the same date.
The following additional information is available for you as an accountant:
(i) The following checks issued by the company to its customers are still outstanding:

Number of issue 846, issued on November 29th: Kshs. 320.00

Number of issue 875, issued on December 26th: Kshs. 49.21
Number of issue 878, issued on December 29th: Kshs. 275.00
Number of issue 881, issued on December 31st: Kshs. 186.50

(ii) A deposit of Kshs. 400 made on December 31 st does not appear on bank statement.

(iii) An NSSF check on Kshs. 850 was returned by the bank with the bank statement.

(iv) The bank charged the company Kshs. 50 of bank charges for the month.

(v) Interest income earned on the company’s average cash balance at bank was Kshs.
1,237.22.

(vi) The bank collected a note receivable on behalf of the company. Amount received by the
bank on the note was Kshs. 550. This includes Kshs. 50 interest income. The bank
charged a collection fee of Kshs. 10.

(vii) A deposit of Kshs. 430 was incorrectly entered as Kshs. 340 in the company’s cash
records.

Required:
Open a bank reconciliation statement for XYZ Ltd. (10 Marks)

QUESTION FOUR

a) The following trial balance was extracted from the books of Kamau on 30th April 20 x 7.
From it, and the note about stock, prepare his trading and profit and loss account for the
year ended 30th April 20 x 7 and a balance sheet as at that date:

Sales Dr Cr
Purchases 210,420
Stock 1st May 20 x 6 9,410
Carriage outwards 1,115
Carriage inwards 840
Returns inwards 4,900
Returns outwards 3,720
Salaries and wages 41,800
Motor expenses 912
Rent 6,800
Sundry expenses 318
Motor vehicles 14,400
Fixtures and fittings 912
Debtors 23,200
Creditors 14,100
 Cash at bank 4,100
Cash in hand 240
Drawings 29,440
Capital 18,827
247,067 247,067

Stock at 30th April 20 x 7 was Kshs. 11,290. (15 Marks)